Biyani's Future Retail to buy out Heritage Foods' retail business

Picture source: ThinkStockKishore Biyani’s Future Retail is likely to announce buying of Chandrababu Naidu owned Heritage Foods’ retail business on Monday evening for around Rs. 300 crore. The deal will be funded by cash and shares of Future Retail.

The deal will be a win-win situation for both the companies, but Heritage Foods will be the immediate beneficiary of the deal. The loss-making retail business has been a drag on the company’s financials for several years now. With retail business gone, the profit of the dairy company will shoot up, which can lead to re-rating of the company’s stock.

For Future Retail, the deal will increase its foothold in Hyderabad, Chennai and Bangalore through Heritage Foods' 100 stores network. For Biyani, it may not take long to turn around these stores which after the acquisition will sell more products that Future Retail’s other outlets sell.

In anticipation of this, Heritage Foods’ stock rose by as much as 9.4% in the afternoon trading on Monday from the previous day’s close. It was trading at Rs. 880 at 3pm. Future Retail shares are trading at Rs 154.1, up 2.7%.